Cryptocurrency Regulation

There has been a lot of uncertainty in the markets surrounding the issue of cryptocurrency regulations. Opinions are divided on both sides about whether regulations would be a good thing for markets or if they would plunge things further down.

The major push for regulations comes from governmental agencies, obviously. They believe that improving controls on virtual exchanges, crypto trading and launch of new ICOs will benefit everyone involved.

Opponents of the regulations are more suspicious. They believe that initial regulations are just the first stepping stone to taking control of the crypto markets, which will create inefficiencies. This will send crypto coins the same way the financial markets have gone.

Support for Regulations

The U.S. SEC officials stated on Thursday that cryptocurrency trading marketplace would be improved by applying similar practices from the stock markets such as execution and surveillance.

Brett Redfearn, head of SEC’s trading and markets division compared the cryptocurrency markets to the Wild West during the U.S. early settlement of the countryside.

Key concerns for the SEC are fraudulent ICOs, market manipulation by major players, theft, hacking and cyber attacks, money laundering, scams and terrorism financing through cryptocurrencies.

The SEC chairman Jay Clayton has compared ICOs to initial public offerings for securities and company stock. He has argued that the ICOs should be subject to similar laws and regulation to protect public interest and comply with existing legislation.

More than 1500 cryptocurrencies are listed at major exchanges and the SEC has issued warnings to investors be extremely careful before making investment decisions.

The virtual currency exchanges operate very similarly to regular stock exchanges. Unlike the regular exchange however, crypto exchanges are not registered and do not follow SEC guidelines. The SEC maintains that they are not against innovation but do want the interests of the investors to be protected.

The crypto markets are similar to the equities markets that emerged in the 90s. Electronic Trading Networks (ECNs) sprang across the country where prices were not always aligned with each other. However, the ruled evolved and markets integrated to become much more efficient.

The SEC officials are not sure about how all the rules would apply to crypto exchanges. They believe that implementation of the best principles would protect against market manipulation, theft and fraud.

Opposition of regulations

Many supporters and investors of cryptocurrencies are opposed to government regulations. The blockchain was developed as a distributed ledger system that cannot be controlled by a central authority. This was a major factor in cryptocurrency popularity around the world.

The second factor that has made cryptocurrencies popular is the complete anonymity for the investors.

However, many opponents of regulations have started to come around given the recent hacks of cyber wallets. By some estimates, hackers have stolen more than $400 million from investors. Anonymity makes it difficult to identify the hackers or get the coins back.

Considering the scams run by shady operators, fraudulent ICOs that have run away with investor money and allegations of market manipulation by some major crypto exchanges, some sort of Crypto exchange regulation does not seem like too bad of an idea.